๐๏ธ What is market liquidity? ๐ธ
โ๏ธMarket liquidity measures how easily assets can be bought and sold at stable prices. The more supply and demand in the market, the higher the level of liquidity.
๐ High liquidity is like a busy market where buying and selling are fast and smooth with a large number of people willing to bid.
๐ On the other hand, low liquidity is akin to a quiet alley: the low number of bidders makes deals hard to come by and price negotiations difficult.
Liquidity is so important that special people called "market makers" are often hired to create supply and demand. In markets with low liquidity, even small amounts of money can have a notable impact on price, influencing it both up and down.
๐ There is a direct relationship between liquidity and volatility. The higher the liquidity and the healthier the market, the lower the volatility, and vice versa.
This means that when a digital token like BTC has high liquidity, a single trade has a negligible impact on its price.
โ๏ธMarket liquidity measures how easily assets can be bought and sold at stable prices. The more supply and demand in the market, the higher the level of liquidity.
๐ High liquidity is like a busy market where buying and selling are fast and smooth with a large number of people willing to bid.
๐ On the other hand, low liquidity is akin to a quiet alley: the low number of bidders makes deals hard to come by and price negotiations difficult.
Liquidity is so important that special people called "market makers" are often hired to create supply and demand. In markets with low liquidity, even small amounts of money can have a notable impact on price, influencing it both up and down.
๐ There is a direct relationship between liquidity and volatility. The higher the liquidity and the healthier the market, the lower the volatility, and vice versa.
This means that when a digital token like BTC has high liquidity, a single trade has a negligible impact on its price.
